March 28, 2023
Changpeng Zhao Expects De-Fi to Cannibalize his Exchange

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The CEO of renowned cryptocurrency exchange Binance, Changpeng ‘CZ’ Zhao, finally acknowledged the contradictions about him trying to establish a presence within the rapidly growing decentralized finance (De-Fi) sector. Simultaneously, he is also working on maintaining Binance’s position as one of the top crypto exchanges in the market. Binance Smart Chain is the name of the new venture that Binance has made in the De-Fi space and it attempts to replicate a number of features that are offered by the Ethereum blockchain. In turn, this has proven to be an ideal space, as a whole, for developers who want to build trading and lending apps using a decentralized blockchain as a base.

Theoretically, there is a possibility that one of these apps could compete, and even overtake, the trading companies of Wall Street and the traditional lenders who currently dominate the mainstream financial industry. However, it should also be noted that De-Fi is also a great threat to crypto exchanges, and Binance is no exception to this threat. Much like its rivals, such as Coincase, Huobi and OKEx, Binance is keeping its hold on the crypto markets. These exchanges have to maintain their hold while there are other competitors that have entered from the De-Fi arena, such as Uniswap, Curve, Balancer and SushiSwap.

Since these De-Fi startups seem to be taking up most of the share of trading volumes, it has become the first case where ‘traditional’ crypto being under threat by ‘innovative’ cryptocurrency in such a way and at such a huge scale. Zhao clarified that he is open to the idea of making changes at Binance and their business model, as long as they are able to stay relevant in the industry. This is particularly because of the fact that De-Fi protocols have increased 16 times in value of the collateral locked in, which has now reached a whopping $11 billion.

Zhao explained in an interview that Binance does not aim to build a CeFi (Centralized Finance) exchange. He said that it is just one of the other larger businesses of the company, which all help in supporting its growth. However, Zhao did reveal that moving into the decentralized space was part of their long-term plans. Certain centralization elements had to be sacrificed by the company for competing with Ethereum when it had developed Binance Smart Chain. In turn, this allowed Binance to protect its brand as well.

21 node operators control Binance Smart Chain and BNB Coin holders carefully elect these operators. However, as the company itself is the largest holder of the BNB, they still have a significant role in regard to the direction of the Binance Smart Chain. However, Zhao also made it clear that it wasn’t the company’s goal to come up with an ‘Ethereum killer’ with their development of the Binance Smart Chain. Instead, he stated that their goal was to provide people with an alternative to the huge transaction fee that’s currently an issue that people seem to have with Ethereum.

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